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Olympic Sponsors Between a Rock and a Hard Place

The Beijing Olympics sponsors need to find ways to prevent international outrage over the situation in Tibet from morphing into a backlash against them. DW-WORLD.DE spoke to one of their advisors about what can be done.

Torn between the West and China, Olympic sponsors, like Adidas, are having a tough time

International outrage has been simmering since the Chinese crackdown on protests in Tibet in March, in which an unknown number of people were jailed or even killed. In the meantime, there have been calls for a boycott of the Games, politicians and athletes have said they would not take part in the opening ceremonies, and the city of Paris this week named the Dalai Lama an honorary citizen.

China has responded with anger and many Chinese have started to boycott French companies. Hundreds of anti-China demonstrators took to the streets in Europe last week to protest against China's approach to Tibet, as thousands of Chinese marched in counter-demonstrations in Berlin, London and Paris. The controversy is unlikely to die down until well after the Beijing Olympics, which run from August 8-24, are over. It's a tough time for Olympic sponsors, such as Coca-Cola, Volkswagen or Adidas.

DW-WORLD discussed their difficulties with Thorsten Hofmann, the CEO of PRSG, a Berlin-based consultancy for political and crisis management. The company recently acquired an Olympic sponsor as a client.

DW-WORLD.DE: An old adage says "all publicity is good publicity." At what point does the damage make it not worthwhile for a sponsor?

Thorsten Hofmann: Starting with "all publicity is good publicity:" That's a dangerous statement, because when you're in a crisis situation, you have the greatest amount of attention a firm could ever want, but unfortunately not in the context you would want it, and that, of course, is the most important thing. If you want publicity, you generally want it in a nice, harmonious context with a positive image transfer.

In our concrete example, the Olympic Games, everyone who positioned themselves as sponsors -- and invested somewhere between 50 and 100 million euros ($80 to $160 million) -- wants to take the Olympics' positive image and create a brand transfer. Adidas as a sports brand wants to participate, VW wants to profit from the dynamics of the Games, and above all, everything should be nice and harmonious. And now for the big dilemma: if the Olympics don't go off as they could, but rather if -- as is now the case -- there's a disregard for human rights, violent attacks, attacks on the torch bearers and disturbances of a political nature, then naturally this image transfer also rubs off on the sponsors. It's no longer so nice and smooth, and at some point as a sponsor you will be asked what your own position is.

Human rights activists have been vocal in their criticism of China

That is, what was originally planned -- we participate in a collective sports competition, the Olympics, and appear prominently as a main sponsor -- can turn into the opposite. For when a state in which the Olympic Games take place, like China, presents itself to the world as riding roughshod over human rights -- that's the outside perception -- then the world asks itself, "What do the sponsors think of this? Do human rights not matter to them? Do they put the value of money above human rights?" That's the negative side of the image transfer.

A similar case is that of T-Mobile and others companies sponsoring cycling in Germany.

It is definitely similar. The cycling sponsors have always profited from the sporting image and the high spectator numbers of, for example, the Tour de France. Now, because of all the doping cases, cycling has become dirty, and this dirtiness at some point rubs off on a brand. Accordingly, ever more sponsors are pulling out. There are cases in the context of sporting events which are absolutely negative for the sponsors' image, for the sponsors' brands, and we, as sponsors, have to decide: "What do I do?". With cycling, sponsors tried at the beginning of the doping crisis to introduce responsibility into the equation, to say I'll create my own guidelines, anyone who takes drugs will be kicked out, I want to fight for clean cycling. But at some point it became clear that the fight was futile, and sponsors said the recurring negative news is affecting my brand negatively, and at some point I pull out. That's what happened.

With the Olympics, at what point should sponsors pull out? When has it gone too far?

There have been protests in China against French companies

That's a super hard question, because you have to see it in the context of a giant market. China is the market of the future -- I think we all agree on that -- and that's why they all have put their energies and their sponsoring budgets into the Olympics. In addition, you have to take into account that China has an entirely different culture from our Western culture. That means, if I start to talk at the Chinese about their culture and to publicly question the things they do, they lose face. Losing face is an affront in China, and you can be sure that as a consequence your company will have a big problem gaining a foothold there.

But on the other hand, if you carry on with sponsoring and incidents occur at the Olympics -- from violent attacks on demonstrators to deaths -- then the companies from outside must be prepared for the rest of the world to ask: "How far does the so-called kowtow to the communist dictatorship go?" For the companies, the question also arises: "How important are human rights to me and how important is money?" That's the predicament the companies currently find themselves in. They are caught between a rock and a hard place.

But getting back to the question. When should they pull out? It becomes very, very critical when there are deaths. If there is suddenly fighting, or in the worst case -- as has happened before in China -- there's shooting, demonstrators are killed with the world watching, then the company has to carefully consider, "How are my opportunities in this market, what should I do now, and how do my other markets judge my behavior?" It's always an individual decision, that has to be made according to the situation.

The torch relay went undisturbed in India; protesters couldn't get near it

If I decide I'm interested in a sponsoring contract -- and am prepared to spend 50 to 100 million euros or more -- why don't I put some thought into a prevention plan? That is, I know China, and I'm familiar with all of its sources of conflict, I'm also familiar with the conflict situation with Tibet, the issues of human rights, poverty, child labor and so on. Why have I not yet given some thought to how I could react to accusations of this nature? The classic tool is crisis prevention work, and it could have had an effect here. And I think, actually, I know that that is the current situation the companies face. They are literally surprised by a matter of course.

One would assume they would have prepared for such an eventuality?

Exactly, you're absolutely right. If I'm prepared to become a sponsor, to spruce up my brand, then I also have to develop my protective shield so my brand isn't damaged. And this shield is preventive work, crisis prevention. At the moment I have the impression that everyone is surprised by what is happening. That something could have happened, must have been clear to everyone. Because China functions differently than Western societies, it's just not understood by the rest of the world.

Do you have sporting events sponsors or Olympic sponsors as clients?

Yes on both counts. The latter we got relatively recently, which is why I can reconstruct things well. It's the case that most of the sponsors haven't given any thought to these things.

What can your company do for them? How can you protect them?

Chinese students rallied this week to express their pride in their country

Of course, to start with we were surprised that there was no concept and in many areas no thought had gone into things. What we're now doing is thinking about how you can show that sponsoring doesn't just mean money to develop a brand, as is assumed, but also to try to participate in shaping societal change. In concrete terms that means developing one's own projects that are cross-nation, that take place with China, in which sensitive issues, like human rights, exposure to publicity, etc., are addressed and in which the added value for a country like China is apparent. The Chinese don't see any added value in developing an Internet that is not controlled, why they should allow press freedom, why they should be transparent or why, for example, they could allow demonstrations as an articulation of free expression.

What do you do if there are calls for boycotts of sponsors?

We have to determine what messages we want to send for the different situations that could arise. Say our sports clothes or our cars aren't being bought anymore. Here the company has to take a stand, and formulating the message is very difficult. They remain between a rock and a hard place, which means that every word hangs in the balance. Every word is a tightrope walk. On the one hand, they have to consider to what extent do I want to damage my future business in China, and on the other hand, I want to clarify my position to the rest of the world. And that is very difficult.